If you're in your prime earning years, your focus is likely on building the wealth you will need to live well in retirement. Americans are living longer and health care costs are rising. Investing enough money to provide sufficient income to sustain your current lifestyle can help pave the way for a more secure retirement. But too much focus on meeting future income needs can be stressful particularly when you are in your 30s, 40s and 50s and may be facing many family commitments. How do you find a balance?
Start by realizing that it's normal to feel a nerve-wracking pull between enjoying your life today and accumulating sufficient wealth to cover all your expenses in retirement. "Thinking about how much income you will need in retirement can be very daunting," says Tracie McMillion, CFA, Head of Global Asset Allocation at Wells Fargo Investment Institute.
For most people, prime working years are also prime family years — the time when children are growing up and older family members may begin to need medical care. Having a single-minded focus on wealth-building at the expense of family priorities can cause major stress, which can even impact your health. More than just an annoyance, chronic stress raises the risk of heart disease, high blood pressure, diabetes, depression, anxiety disorder, and other illnesses.
Burying your head in the sand isn't the answer, either. "People tend to focus more on the present than the future," says Margie E. Lachman, Ph.D., professor of psychology and director of the Lifespan Initiative on Healthy Aging and Lifespan Lab at Brandeis University.
While it can be fun to live in the moment, the secret to building wealth without damaging your health lies in taking a balanced approach. Here are six ways to find a work-life balance that allows you to enjoy today while saving for tomorrow.
1) Don't wait
If you don’t think that you will be able to meet your income needs in retirement, don't waste time beating yourself up about it. Meet with your financial team now to take immediate action. You may want to consider whether you are accumulating wealth in the most tax-efficient accounts and also revisit your regular expenditures. Having a clear plan in place can help you increase opportunities available to you when you retire.
2) Rethink retirement income
When interest rates are high, many retired investors look to bond portfolios for income. But with sustained low interest rates, those accumulating wealth for retirement as well as those already in retirement may need to consider other avenues to generate their income.
"Sometimes, fear of risk makes people too conservative with retirement savings. They don't want to lose what they've worked so hard for," McMillion says. "But you do want to get a good return on your money." Because people are living longer in retirement, you may want to keep exposure to equities and other growth investments even as you get closer to retirement. A portfolio that relies solely on fixed income may not be able to keep up with inflation. “Talk to your investment specialist to determine which strategies align with your specific needs,” offers McMillion.
3) Involve your family
Take advantage of opportunities to talk with your family about finances. When your children are young, it can help to explain why it's so important for you to save for the future and that sometimes short-term sacrifices are necessary to make that happen. Understanding the family's financial realities may help lower everyone's stress levels when you occasionally have to make the choice to skip a Little League game or gymnastics meet in order to put in some extra hours at work. By having regular conversations about budgeting and investing, your children will be well informed as they mature and more prepared for their own financial futures.
4) Take care of your health
Neglecting self-care not only interferes with your quality of life but can also make your post-retirement health care costs skyrocket. Protect your health and your nest egg by eating a healthy diet, exercising most days of the week, maintaining a healthy weight, getting regular health checkups, and staying up to date on vaccinations. These things do take time and effort, but they can have big payoffs later in life.
5) Make your money work as hard as you do
Business owners often have their company’s balance sheet top of mind as they build their business. But once the business is passed along, their personal balance sheet will need to be structured to sustain them. As always, diversification and asset placement are key strategies to help plan for growth and income in a portfolio. Your investment professional can help you evaluate your current allocation against your anticipated needs and recommend adjustments to help keep you on track.
6) Think beyond dollars
Investing cash during your prime earning years is important, of course. But it's also essential to plan in a more holistic way as well. "Make investments in the future — not just monetary ones, but also in relationships, health, career, and education," Lachman says. "They all can pay big dividends in the long run."